Pakistan to repay $1bn Eurobond, aiming to strengthen financial stability

In a significant move towards fulfilling its international financial commitments, Pakistan is set to repay a $1 billion Eurobond due mid-April 2024.

This repayment will mark a decrease in the country’s Eurobond and Sukuk debt below the $7 billion threshold.

The State Bank of Pakistan (SBP) has confirmed its readiness to proceed with the repayment, pending instructions from the finance ministry.

The decision comes at a time when the Eurobond, maturing on April 15, 2024, reached a record high in value, propelled by investor confidence in Pakistan’s ability to meet its obligations following a notable improvement in its foreign exchange reserves, which recently exceeded $8 billion.

This increase in reserves is seen as a crucial factor in Pakistan’s capacity to manage upcoming foreign debt repayments.

Pakistan’s history of timely Eurobond repayments, including a $1 billion pre-mature repayment last December, has been highlighted as a testament to its fiscal management, even amid previous foreign exchange crises.

The success in managing these repayments has been attributed in part to securing a $3 billion loan from the International Monetary Fund (IMF) in June 2023, which played a pivotal role in stabilizing the economy.

Looking ahead, the SBP Governor has assured that Pakistan has fully arranged for its debt repayments for the fiscal year 2023-24, indicating a robust plan for financial management.

Despite an expected dip in foreign exchange reserves following the April repayment, an anticipated $1.1 billion tranche from the IMF, due by the end of April, is projected to replenish these reserves.

The enhancement of Pakistan’s financial position is also supported by increased inflows from foreign portfolio investments and strategic currency management by the SBP.

Moreover, the country is exploring additional avenues for raising funds, such as issuing a Panda bond in the Chinese market to garner an additional $300 million, aimed at further stabilizing foreign exchange reserves.

As Pakistan navigates its financial commitments, the stability and performance of the Pakistani rupee, which has shown remarkable resilience and appreciation against the dollar, remain critical factors in attracting foreign investment and maintaining economic stability.

The finance ministry, along with the SBP, continues to monitor and implement strategies to ensure the country remains on a path of sustainable financial health.